Relocation

Definition: The movement of a business from one region or location to another

Businesses commonly cite five main reasons for changing
locations. These are labor and work force issues, the desire to
reach new markets, the need to upgrade facilities or equipment, the
desire to lower costs or increase cash flow, and considerations
about quality of life. For different businesses and at different
times, certain concerns are more important than others. But just
about all moves can be attributed to some combination of these
issues.

Chief among current reasons for business relocation is the need
for a suitable work force. The shortage of workers in some
occupations, especially those requiring technical expertise, is
acute. For firms that need specialized employees, it may be well
worth it to relocate to an area where they can easily find these
kinds of employees.

Another reason to consider moving is when a company finds itself
in outmoded or undersized facilities. Some businesses start in a
small facility, such as the founder's garage, and then move to
bigger quarters in the same city. Later, the business outgrows that
location or begins to find fault with its facilities, services,
utilities, infrastructure or other features. Cost is a concern in
any business decision, and a move can cure--or create--many cost
issues. For starters, the cost of living varies widely among
cities. In Little Rock, Arkansas, for example, the cost of living
is 13 percent below the national average. At the other end of the
spectrum, New York City's costs are more than twice the U.S.
average. Theoretically, a move from Manhattan to Little Rock could
yield significant savings.

But costs involve more than living expenses and differences in
geographic costs have leveled out in recent years. Companies often
find themselves forced to compromise between staying close to
target markets and choosing the lowest-cost facility. That's one
reason for the exodus of employees from central cities to nearby
suburbs, which, according to the U.S. Census Bureau, resulted in 3
million people leaving the cities, while the suburbs gained 2.8
million in one recent year.

Depending on circumstances, you may have other financial issues
to consider. Large companies seeking to build semiconductor
factories or auto plants, for instance, often land well-publicized
tax concessions worth billions of dollars.

An entrepreneur may be able to tap a cash flow windfall by
selling a building or land that has appreciated in value, then
purchasing or renting lower-cost space.

An even more intangible issue is quality of life. Companies
evaluating relocation often look at recreational opportunities,
education facilities, crime rates, health care, climate, and other
factors when evaluating a city's quality of life. That's another
reason deteriorating inner cities are losing businesses, as
companies seek an improved quality of life elsewhere.

While moving carries risks, a move can be one of the best things
you ever do for your business. There are no guarantees in
relocation, and as many things can go wrong with a move as can go
right. Common mistakes include rushing the decision, focusing too
narrowly on a few costs, failing to use available economic
development services, ignoring quality-of-life factors, missing
important environmental or regulatory concerns, and, believe it or
not, failing to plan for future expansion. These mistakes can be
boiled down to hurrying too much and trying to do a move too
cheaply.

An entrepreneur must figure in the cost of business
interruption. Almost inevitably, a business's productivity will be
reduced for a period of days or even weeks after a move. And that's
not all. You may also have some loss of goodwill, especially if
you've been in that location for many years.